Additional bonds tests require debt service be no more than 5% of the state's prior year sales tax receipts to issue senior lien bonds and 9.8% to issue junior obligation bonds; this effectively requires 20x coverage to issue senior lien bonds and 10.2x coverage to issue junior obligation bonds.
In Fitch's opinion, the Build Illinois bond structure warrants a rating two notches higher than the state's IDR given the narrowing of the dedicated revenues through the additional bonds tests (ABT) and the specific nature of the borrowing program.
Legal covenants, including rate covenants and additional bonds tests, are adequate overall.
Legal covenants are adequate, with an additional bonds test of 1.5x (senior lien) and 1.2x (subordinate lien), and a rate covenant of 1.25x and 1.20x, respectively.
All liens are open to additional leveraging subject to their respective
additional bonds tests.
Although the program's 1.05x coverage requirement and
additional bonds tests are considered weak, Fitch calculates the minimum annual debt service coverage to be 1.3x, which is mostly in line with Fitch's 'AAA' median of 1.4x.
There are no
additional bonds tests or financial covenants.
Although the program's 1.05x coverage requirement and
additional bonds tests are considered weak, Fitch calculates actual minimum annual debt service coverage to be a very solid 2.5x.
TWO-NOTCH DISTINCTION: The narrowness of the pledged revenue stream, based on the
additional bonds test leverage limitations for the senior and junior liens, and the statutorily defined nature of the borrowing program support a rating two notches above the Illinois IDR.
